How to Start a Small Business in Australia: A Beginner's Guide

Thinking about starting a small business in Australia but not sure where to begin?

Maybe you've got a side hustle in mind, want to turn a hobby into an income, or you're ready to finally become your own boss.

Whatever your reason, getting a business off the ground can seem like a lot of work. There are registrations, tax obligations, licences, insurance and plenty of other things to consider.

But don't let that put you off. You don't need to figure everything out at once.

Here's everything you need to know to get your business up and running.

What we'll cover

1. Choose a business idea and do your research

2. Choose the right business structure

3. Register your business

4. Understand your tax obligations

5. Check licences and permits

6. Get the right business insurance

7. Set up your business banking and accounting

1. Choose a Business Idea and Do Your Research

Before registering your business or spending money on equipment, take some time to work out exactly what you want to offer.

Start by asking yourself a few simple questions:

• What product or service will I provide?

• Who are my potential customers?

• Is there enough demand for what I'm offering?

• Who are my competitors?

• How much will it cost to get started?

• How much can I realistically charge?

For example, let's say you're thinking about starting a pressure cleaning business.

Before buying equipment, research other pressure cleaning businesses in your area. Find out what services they offer, how much they charge and whether there's an opportunity to offer something different.

You should also work out your likely startup costs, including equipment, insurance, fuel, marketing and other expenses.

Do I need a business plan?

You don't necessarily need a complicated 50-page business plan when starting a small business.

However, having a basic plan can help you understand your goals, expected expenses, pricing and how you'll attract customers.

A simple spreadsheet covering your startup costs, expected income and ongoing expenses is a good place to start.

Tip: Don't spend thousands of dollars before testing whether people are actually interested in your product or service.

2. Choose the Right Business Structure

One of the first important decisions you'll make is choosing your business structure.

Your business structure affects things like:

• How your business income is taxed.

• Who makes business decisions.

• Your legal responsibilities.

• How profits and losses are handled.

• Your personal liability if something goes wrong.

In Australia, there are four common business structures.

Sole Trader

A sole trader is an individual who runs their own business.

It's generally the simplest and least expensive structure to establish, making it a popular option for freelancers, consultants, tradies and people starting a side hustle.

Advantages:

• Relatively easy and inexpensive to set up.

• You have full control over the business.

• Fewer reporting and administrative requirements.

• Business income is generally included in your personal tax return.

Disadvantages:

• You're personally responsible for business debts.

• Your personal assets may be at risk if the business runs into financial difficulties.

• You can't separate your personal liability from your business liability in the same way a company can.

Example: If you're starting a small gardening, cleaning or freelance business on your own, operating as a sole trader may be a suitable starting point.

Partnership

A partnership is a business owned and operated by two or more people. Partners generally share the responsibilities, profits and decision-making involved in running the business.

Advantages:

• Relatively straightforward to establish.

• Shared workload and responsibilities.

• Partners can contribute different skills and experience.

Disadvantages:

• Partners can be personally responsible for partnership debts.

• Disagreements can arise over business decisions.

• Profits need to be shared.

Tip: If you're going into business with someone else, consider getting a partnership agreement prepared. It should clearly explain everyone's responsibilities, financial contributions and how profits will be distributed.

Company

A company is a separate legal entity from the people who own and operate it. In Australia, a common company structure is a proprietary limited company (Pty Ltd).

Advantages:

• Generally provides limited liability protection to shareholders.

• Can be suitable for businesses planning to grow.

• Ownership can be shared through company shares.

Disadvantages:

• More expensive to establish and maintain.

• Additional reporting and administrative requirements.

• Directors have legal responsibilities and obligations.

A company may be worth considering if you're planning to grow your business, employ staff or bring in additional owners.

However, limited liability isn't absolute. Personal guarantees, director responsibilities and certain other circumstances can expose individuals to liability.

Trust

A trust is a structure where a trustee holds and manages assets for the benefit of beneficiaries. Trusts are sometimes used for business ownership, investment and asset management.

Trusts aren't usually the simplest option for someone starting their first small business.

Advantages:

• Can provide flexibility in how income is distributed, subject to tax rules.

• May be useful for certain asset protection and business arrangements.

Disadvantages:

• More complicated to establish and manage.

• Higher setup and ongoing administration costs.

• Specific legal and tax obligations.

Which business structure should you choose?

There's no single structure that's right for everyone.

If you're starting a small business on your own, a sole trader structure may be a practical starting point. However, your personal circumstances, business risks and future plans should all be considered.

If you're unsure, speak with an accountant or business adviser before making a decision.

3. Register Your Business

Once you've decided on your business structure, it's time to make your business official.

There are a few important registrations to understand.

Apply for an Australian Business Number (ABN)

An Australian Business Number (ABN) is an 11-digit number that identifies your business when dealing with the government, customers and other businesses.

Most businesses need an ABN. You'll commonly use it when:

• Invoicing customers.

• Registering a business name.

• Registering for GST.

• Dealing with suppliers and other businesses.

How much does an ABN cost?

Applying for an ABN directly through the Australian Business Register is free.

Be careful of third-party websites charging fees to complete an application that you can generally do yourself.

Not everyone automatically qualifies for an ABN. You must be carrying on, or taking steps to start, an enterprise and meet the relevant eligibility requirements.

Register Your Business Name

Your business name is the name you use when trading with customers.

If you're operating as a sole trader under your own first name and surname, you generally don't need to register a business name.

However, if you want to trade under a different name, you'll generally need to register it with the Australian Securities and Investments Commission (ASIC).

For example:

• John Smith – generally doesn't require business name registration.

• John Smith Plumbing – generally requires business name registration.

Before registering, check whether your preferred name is available.

Important: Registering a business name doesn't automatically give you exclusive ownership of that name as a trade mark. If you want stronger brand protection, consider checking the name through IP Australia's trade mark search.

Register a Company (If Applicable)

If you've decided to operate through a company, you'll need to register it with ASIC.

Once registered, your company will receive an Australian Company Number (ACN).

An ACN is different from an ABN.

You'll also need to consider director identification requirements if you're appointed as a company director.

You can find more information about registering a company through ASIC.

What About a Tax File Number (TFN)?

Your tax file number requirements depend on your business structure.

If you're operating as a sole trader, you'll generally use your personal TFN when lodging your individual tax return.

Companies, partnerships and trusts generally have their own tax registration requirements.

4. Understand Your Tax Obligations

Tax is one of the most important things to understand when starting a small business.

You don't need to become a tax expert, but understanding the basics will help you avoid unexpected bills and compliance problems.

Here are some common tax obligations to be aware of.

Income Tax

The amount of income tax you pay depends on your business structure and taxable income.

For example:

• Sole traders generally report their business income in their individual tax return.

• Companies generally pay tax on their taxable company profits.

• Partnerships generally distribute profits to partners, who report their share in their own tax returns.

• Trusts have specific tax rules depending on the arrangement and distributions.

Remember, business income isn't the same as business profit. For example, if your business generates $100,000 in revenue but has $35,000 in allowable business expenses, your profit before tax is $65,000.

Keep accurate records of your income and expenses from day one, and always consult with your accountant.

Goods and Services Tax (GST)

GST is a 10% tax applied to most goods and services sold or consumed in Australia.

You'll need to register for GST if your business turnover reaches $75,000 or more per year.

Importantly, GST turnover refers to business turnover, not profit.

For example, if your business generates $80,000 in relevant GST turnover but has $30,000 in expenses, you may still need to register for GST.

If your business is below the GST threshold, you can generally choose to register voluntarily.

However, once registered, you'll need to meet the relevant GST reporting and payment obligations.

You can find out more through the Australian Taxation Office (ATO) website.

PAYG Withholding

Planning to hire employees?

You'll generally need to:

• Register for PAYG withholding

• Withhold the appropriate amount of tax from eligible employee payments

• Pay superannuation contributions

Superannuation

If you employ eligible workers, you'll need to meet your superannuation obligations.

The superannuation guarantee rate is 12% from 1 July 2025.

From 1 July 2026, Payday Super requires employers to pay super contributions in connection with each payday rather than following the previous quarterly payment cycle.

It's also important to understand that some contractors can be entitled to superannuation, even if they have an ABN.

For more information, visit the Australian Taxation Office (ATO) website.

Tip: Consider speaking with an accountant early on. Getting your tax and bookkeeping arrangements right from the beginning can save you a lot of trouble later.

5. Check Licences and Permits

Depending on the type of business you're starting, you may need specific licences, permits or approvals before you can legally operate.

These requirements can vary depending on your industry, state or territory and local council.

Here are some examples.

Food Businesses

If you're planning to operate a café, food truck, catering business or market stall, you may need to register your food business with your local council.

Food safety requirements may also apply.

Home-Based Businesses

Planning to run a business from home?

You may need to check local council planning requirements, particularly if:

• Customers regularly visit your property.

• You're storing large amounts of stock or equipment.

• Your business creates additional noise or traffic.

• You're making significant changes to your property.

Trades and Construction

Many trades require specific licences or registrations.

For example, electricians and plumbers generally need the relevant licences before carrying out regulated work.

Building and construction businesses may also have additional licensing and compliance requirements.

How do you find out which licences you need?

The Australian Business Licence and Information Service (ABLIS) is a useful starting point.

You can search by business activity and location to identify licences, permits and approvals that may apply.

6. Protect Your Business with Insurance

Starting a business involves risks, and the right insurance can help protect you if something unexpected happens.

The type of insurance you need depends on your industry, business activities and whether you employ staff.

Here are some common types of business insurance.

Public Liability Insurance

Public liability insurance can help protect your business if someone is injured or their property is damaged because of your business activities.

For example, imagine you're a pressure cleaner and accidentally damage a customer's outdoor tiles while completing a job.

Public liability insurance may help cover eligible claims and associated legal costs, depending on your policy.

It's particularly relevant for:

• Tradies and contractors.

• Cleaners.

• Landscapers.

• Mobile service businesses.

• Businesses that regularly visit customers.

It isn't compulsory for every business, but it may be required by certain licences, contracts or industry arrangements.

Workers Compensation Insurance

If you employ workers, you may need workers compensation insurance.

This insurance provides cover for eligible work-related injuries and illnesses.

The requirements differ between Australian states and territories.

For example, in Victoria, most employers must register for WorkCover insurance, subject to certain exemptions.

If you're engaging contractors, don't automatically assume they fall outside workers compensation requirements. Some contractors may be treated as workers under the relevant legislation.

Professional Indemnity Insurance

If your business provides professional advice, consulting or specialist services, professional indemnity insurance may be important.

It can help protect against certain claims arising from alleged professional negligence, errors or omissions.

Common businesses that consider this type of insurance include:

• Accountants

• Consultants

• IT contractors

• Marketing agencies

• Designers

Tip: Don't simply choose the cheapest insurance policy. Check what is covered, exclusions, limits and excess amounts before purchasing.

7. Set Up Your Business Banking and Accounting

One of the easiest ways to make business ownership more manageable is to organise your finances from the beginning.

You don't want to spend hours trying to work out where your money went when tax time arrives.

Open a Separate Business Bank Account

Even if you're operating as a sole trader, having a dedicated bank account for your business income and expenses is a good idea.

It makes it easier to:

• Track business income

• Monitor expenses

• Reconcile transactions

• Understand your cash flow

• Prepare for tax time

For companies, maintaining separate business finances is particularly important.

Choose Accounting Software

You don't need complicated accounting systems when starting out, but using suitable software can make a big difference.

Some popular accounting platforms used by Australian small businesses include:

• Xero

• MYOB

• QuickBooks

These platforms offer features such as:

• Creating and sending invoices.

• Recording business income and expenses.

• Tracking cash flow.

• Managing payroll.

• Preparing information for BAS reporting.

Compare the features and subscription costs before deciding which platform is right for your business.

Keep Records of Your Business Expenses

Make a habit of keeping receipts, invoices and other financial records.

Common business expenses may include:

• Equipment and tools

• Vehicle expenses related to business use

• Advertising and marketing

• Business insurance

• Software subscriptions

• Office supplies

Not every expense is automatically tax deductible. The rules depend on the nature of the expense and how it's used. Good record-keeping makes it easier to identify eligible deductions and support your tax claims.

Final Thoughts

Starting a small business in Australia doesn't need to be as complicated as it first seems.

You don't need to have everything perfect before getting started. The important thing is to understand the basics, make informed decisions and get the right foundations in place.

Start with your business idea, research your market, choose a suitable business structure and work through the registration and compliance requirements.

Once these foundations are in place, you can focus on what really matters: finding customers, delivering a great service and growing your business.

Important Information

The information in this article is general in nature and is intended for educational purposes only. Business registration, taxation, insurance and employment requirements can vary depending on your circumstances, business structure and location. Always check the latest information with the relevant Australian government authority or seek advice from a qualified accountant, lawyer or other professional before making important business decisions.

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